Wuhan virus could negatively affect airline sector in 1Q
Published on 31 Jan 2020. | Source: theedgemarkets.com
Airline sector
Maintain neutral: Passenger traffic growth in Malaysia grew 6.1% year-on-year (y-o-y) in 2019 to 105 million. AirAsia Group Bhd carried 8.4% more passengers y-o-y at 35 million, while AirAsia X Bhd (AAX) marginally declined 1.6% to six million passengers during the year. AirAsia constituted 33% of the total industry growth in Malaysia.
In the fourth quarter of 2019 (4Q19), AirAsia added a 4% seat capacity but at a softer load factor of 82% due to a change in pricing strategy. It also began commercial flights with its newly delivered Airbus A321neo in November 2019, with 236 seats — up from 180 seats in the A320.
Under AAGB Consolidated, its passengers carried grew 8.8% y-o-y in 4Q19, mainly driven by AirAsia Indonesia up 30% y-o-y and Philippines AirAsia up 21% y-o-y. This was on capacity expansion of 19.6% and 24.6% y-o-y respectively in 4Q19. However, passengers’ load declined to 82% versus 4Q18’s 84%.
AAX’s passengers carried grew 7.8% in 4Q19, with its available seat kilometre up 0.5%, due to a route network realignment during the year, resulting in a shorter stage length of 4,524km in 4Q19, compared with 4,745km in 4Q18. Passengers’ load was higher at 81% versus 4Q18’s 78%.
Malaysia has suspended all visa facilities for Chinese tourists from Wuhan, Hubei and neighbouring provinces in China as part of its measures to contain the Wuhan virus outbreak.
We understand that AirAsia also suspended its route to Wuhan until end-February. The World Health Organization reported 6,065 cases globally currently, with 132 deaths. In Malaysia, the health ministry has confirmed seven positive cases — all Chinese nationals visiting the country.
We believe this could negatively affect travel appetite within Asean at least for 1Q20, especially AAX with a bigger international exposure via its long-haul operations. — PublicInvest Research, Jan 30
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